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Is this the dip investors have been waiting for?

Reporting season continues to offer opportunities, but geopolitical tensions are rattling markets.

Despite the excitement of reporting season, geopolitical tensions have driven the market to its worst day since September 2020. The news that Russian troops had invaded Ukraine on Thursday saw the ASX200 drop below 7000 points, shedding as much as 3.3% before closing down 2.99% at 6990. The market had been trending sideways through the week as investors feared tensions could escalate. Global markets had shown similar concerns, with the Nasdaq down 2.5% on Wednesday night.

 

ASX200 over five days to 24 Feb (XJO)

Source: nabtrade

 

Seasoned investors often seek out gold and consumer staples in times of heightened volatility, and this week has been no different. Despite announcing a near halving of production in its results last week, gold miner Newcrest Mining (NCM) has surged in line with a rising gold price; many nabtraders have been happy to jump on board. With an average trade size of nearly $100,000, these are not small bets. There has also been elevated buying in Northern Star Resources (NST) and the physical gold ETF from ETF Securities (GOLD). Those looking to profit from any downside were buyers of BBOZ, the Betashares Strong Bear Hedge Fund ETF.

For those seeking out consumer staples, it’s been a tricky week. Woolworths (WOW) bounced on Wednesday on an increase in net sales, despite a 6.5% fall in net profit, coming in above market expectations. Wesfarmers’ (WES) results last week demonstrated that even Bunnings could fall prey to Covid weakness, and the company’s share price has been under pressure ever since. Nabtrade investors have taken the opportunity to top up their holdings.

 

Wesfarmers shares over twelve months (WES)

Source: nabtrade

 

Dominoes Pizza (DMP) reported a fall in net profit on Wednesday, crashing more than 16% to a 52 week low. Those thinking they’d picked up a bargain would have been disappointed when the share price fell a further 6.5% on Thursday; the stock failed to make the top 20 most traded on its second fall, suggesting the optimists were tapped out.

Despite the price action surrounding reporting season, the broad market sell off on Thursday sent investors back to their old faithfuls. High value traders continued to move into Fortescue Metals Group (FMG), which was down over 4%, and BHP (BHP), now Australia’s largest listed company, has also been a strong buy as its share price fell nearly 7%. Financials also surged back to the top of the charts, with nab (NAB) a sell after a 2.5% fall and Westpac (WBC), a recent sell as it has climbed from its lows, a buy.

Those looking to pick up truly beaten up stocks chased Appen (APX), which fell nearly 30% to close after reporting a net profit down 20% and provided no guidance for 2022. Appen’s shares are down 70% over twelve months, and have fallen far from their peak of $40 when it was a share market darling as part of the WAAAX stocks. Also (relatively) popular was Flight Centre (FLT), which also disappointed after the Omicron variant of Covid dashed hopes of an early return to leisure travel. Flight Centre dropped 10% on Thursday, although unlike Appen, it is up nearly 10% over 12 months.

 

Appen share price over five years (APX)

Source: nabtrade

 

On international markets, there has been a slight shift away from buying, with more investors taking profits as markets wobble. Tesla (TSLA.US), far and away the most held international stock on nabtrade, has seen recent profit taking; despite falling 7% overnight and losing more than 25% since November, it is currently trading around its price last October. Sells have also included Visa (V.NYS), General Motors (GM.US) and hydrogen hopeful Plug Power (PLUG.US).

 

 

Analysis as at 24 February 2022. This information has been provided by WealthHub Securities Ltd the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 (NAB). Whilst all reasonable care has been taken by WealthHub Securities in reviewing this material, this content does not represent the view or opinions of WealthHub Securities. Any statements as to past performance do not represent future performance. Any advice contained in the Information has been prepared by WealthHub Securities without taking into account your objectives, financial situation or needs. Before acting on any such advice, we recommend that you consider whether it is appropriate for your circumstances. 


About the Author
Gemma Dale , nabtrade

Gemma Dale is Director of SMSF and Investor Behaviour at nabtrade. She is the host of the Your Wealth podcast, a fortnightly podcast for investors, featuring insights and updates from markets and finance experts across a range of topics. She provides regular market and finance commentary on ausbiz and in other media including AFR, the Australian, ABC and commercial tv and radio. Gemma was previously the Head of SMSF Solutions for nab, and the Head of Technical Services for MLC, where she led a team of specialists providing advice to advisers and their clients on SMSF, super, tax, social security and aged care.